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Tuesday, June 28, 2005

Another Look at Minimum Wage

I wouldn't consider myself in lockstep with the Republican Party. I don't even think I'm a solid conservative. Those labels frequently mean different things, anyway. There are social and economic conservatives. There are big tent Republicans and moderates and mavericks. Like all government, the individuals with the R next to their name often do things with which I disagree.

One thing I've been irked by is the spinning of gas price escalation. The claim is that, adjusted for inflation, gas prices would have to be over $3 a gallon to compare to 1970s peaks. That may be good in some sense, but gas prices doubled from 1977-1981. This decade, gas prices have nearly doubled since the terrorism-driven low in late 2001. Inflation itself is tough to pin down as an indicator. Wage inflation is affected by huge top salaries while low wage growth stagnates.

So, I came up with a subversive indicator of ecomonic hardship. Below is a graph comparing the number of gallons of gas you can buy on one hour of minimum wage from 1970 to 2005. Gas prices are taken from a California website but a 2005 price of 2.17 a gallon seems pretty close or even low to me. Minimum Wage is data from

Like all statistics, the numbers are pretty meaningless. However, since free market types continue to use inflation adjusted gas prices, I have to point out that the amount of gas Minimum Wage can buy is at an all time low, 2.4 gallons compared to 2.5 at the end of the 1970's recession. Over the last 35 years, the average amount of gas at minimum wage is 3.5 gallons. At current pump prices, Minimum Wage would have to be around $7.50 an hour with that ratio.

Looking just at Minimum Wage data, the spreadsheet defined linear extrapolation puts a historical level for 2005 to be about $6 an hour. New York has, in fact, done this. Of course, the Minimum Wage has its own pitfalls. As the minimum stuck, the market has driven wages up. Many $5.15 an hour jobs are stepping stones to people with little work experience. In some cases, raises in minimum wage leads to the elimination of jobs.

This goes back to my initial point. I like to think the market can set their own wages. Sometimes, though, I wonder about the motives of business. More than that, I don't like politicians avoiding their basic responsibility to enforce laws. As the market drives wages up, lax immigration policy drives them back down. While business ramps up in the US, China uses Communist monetary practices on the open market while America does nothing. Does the answer involve raising the Minimum Wage? Probably not, but that's what will happen if Republicans don't get more conservative.

Tags: Gas Prices, Minimum Wage


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